How TikTok is slowly killing Alibaba
On the surface, they don’t look much like competitors: TikTok, the social media platform made famous by dancing teenagers, and Alibaba, the ever-conquering e-commerce giant.
But as Henry Chia explains, the Chinese tech powerhouses are locked in a somewhat hidden battle for supremacy… and you might be surprised that TikTok is in the box seat.
It’s been a difficult period for Alibaba.
Not only has it copped a crushing fine for anti-monopoly beaches and endured a crippling economic slowdown, its fearless founder Jack Ma was forced to give up control of affiliated company the Ant Group.
They, in themselves, aren’t insurmountable problems.
With a market cap of almost US$300 billion, Alibaba is well and truly big enough to weather even the most violent of storms.
But along with its well-documented recent challenges, the company is also facing a potentially deadly showdown with a strong, young, barnstorming rival.
That rival, is TikTok
Now, you might be wondering how TikTok could possibly take down an e-commerce player as established as Alibaba.
Well, as S&P global ratings has noted, more and more people are shopping online using through increasingly popular short-form video platforms.
Those platforms, which include TikTok (known as Douyin in China) and Kuaishou Technology, are now taking share in high-spending categories, including cosmetics and fashion.
Influencers from the uber-famous Kim Kardashian to the lesser-known South Korean actress Lee Si-Young are building huge audiences who love to buy what they promote.
TikTok’s rapid rise
TikTok was launched in 2016 and as of June 2022 had a whopping 400 million monthly active users.
The user base and user time spent on the platform have surged and it’s estimated that Chinese internet users now spend nearly 35% of their online time on short-form video platforms.
“These platforms can monetize user attention through advertisements and by selling products directly through their live streaming platforms,” S&P said in a new report.
“As a result, among the top six e-commerce platforms, Douyin’s and Kuaishou’s combined GMV share has surged from less than 2% in 2018 to 10% in 2021.”
This rise represents an incredible 800% increase in GMV size in less than three years.
The power of attention
Anyone in marketing will tell you it’s all about “getting the eyeballs” – and TikTok is certainly doing that.
Those eyeballs are generally young, and that bodes well for the short-form video platforms in the future.
“The runway for growth remains long,” says S&P.
“And as the largest e-commerce platform in China, Alibaba could be the most affected by their expansion.”
“Short-form video key opinion leaders and their user-generated content are highly engaging and can often be more effective in selling or advertising consumer products, particularly for the more profitable long-tail or fashion-related consumer products.”
S&P does, however, point out that the likes of TikTok face a ceiling for their e-commerce business.
“Users flock to short-form video apps mostly for entertainment,” the ratings agency said.
“Short-form video platforms that push too much e-commerce content risk alienating users.”
The battle lines are drawn.
It remains to be seen which army will prevail, but at this stage, TikTok appears to have the numbers.
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